This is, of course, completely divorced from reality.

Maybe better to consider the same problem in a different domain: encryption. A court can order you to give up your encryption key or password. They can even do this if you don't know or have lost your password/key. But neither the court nor its enforcement agencies can simply issue a judgement to decrypt an encrypted email; your compliance is required. The court can hold you in contempt for the rest of your life for not revealing a key you may or may not have, but they can't force you to decrypt it if the key is lost or you don't give in.

Likewise for cryptocurrency and "code is law" smart contracts. A court (or regulator) could demand all they want that a bitcoin transaction be reversed, or that a DAO smart contract be frozen. But if the underlying protocol works as it is supposed to, and if mining/staking is properly decentralized, there ain't shit they can do to actually enforce that demand.

People transacting on a blockchain are still subject to local laws, and need to comply with relevant regulatory directives. No one of consequence seriously believes that something is above the law just because it happens on a blockchain. But pragmatically, a regulator can control the blockchain about as effectively as NASA could get into space by legislating gravity.

But anyway, it's still entirely wrong because they can still just catch you using traditional means. Like catching you on tape admitting you stole the Bitcoins, or getting a video of you doing it, or getting credible witnesses to say that you did it. Or similarly, to retrieve the stolen coins just get a video of your keyboard while you type the pass phrase to the wallet, or just liquidate the rest of your assets into dollars and pay back the victim that way... Like the whole thing just makes no sense. Even if it did actually work it would still be terrible because the system you describe means that if you get your bitcoins stolen and you catch the thief and he admits he did it and then intentionally goes to jail to avoid having to give the tokens back so they just sit there unused in the wallet just to spite you... you can literally never get them back. Why would anyone actually want that??? I am honestly trying not to make this so outlandish but this is entirely what you just described. It's completely ridiculous.

The only thing this accomplishes is if you are trying to destroy money and make someone suffer by taking destructive actions... but like, if you are really an evil and petty criminal person you can also just do that with anything else? Like, rob them at gunpoint and set their cash on fire? Or slash their car tires? No one needs Bitcoins just to be an asshole, you can see that every day on this planet...

And it seems hard to keep US machines (or any other country) out of a permissionless distributed algorithm? Effectively, any country could claim jurisdiction pretty easily, if it wanted, by adding a machine to the network.

A very US-centric view is it not? Many places can force you to decrypt something by law. In fact the US does on entry to the country and can refuse entry if you do not comply.

> there ain't shit they can do to actually enforce that demand.

Watch forks become more commonplace and "official" forks being recognised and non-official forks being barred from use in any legitimate transactions. The courts will have the power to force blockchains to reverse transactions or other fraud this way - at a technical level still quite difficult but if it becomes law then solutions to make it easier will be created. Perhaps to cherry pick transactions just like you can cherry pick git commits.

I wouldn’t be so sure about that, unless you are equally convicted in that court’s jurisdiction’s conviction to outright ban the whole chain from use - because as soon as two courts mandate two different forks, one of them will be banning a chain that the rest of the globe has consensus on. It’s a lot like banning a whole region from sending mail because one person in that region got caught mailing drugs.

Here we are talking about the hypothetical situation of the U.S claiming complete jurisdiction of Ethereum. The U.S could make whatever laws it likes around the usage of Ethereum, legislate that all nodes have to adhere to these laws and job is done. The rest of the world can say "lolbye" and continue using it like nothing has happened, but in the U.S they would likely have to fork and create a new chain, and those who want to use it legally in the U.S would also have to use this new U.S-regulated chain. From there they can then implement processes to reverse transactions, introduce identification requirements etc.

When your protocol’s primary use case relies on denominating centralized currency, it makes these types of network attacks far, far more effective when the attacker controls that currency. People have completely forgotten about any use case of a non-excludable censorship resistant network that isn’t tokens, but I digress.

I must not be explaining well, because you're saying the same thing I am. There can be consequences for refusing to comply, ranging from being turned away at the border to being thrown in jail, all the way to, in some countries, torture and execution. That's how the government gets you to comply.

But--here's the critical point--your compliance is required to actually decrypt the email/drive/whatever. This is unlike, say, a cloud hosting provider where the government can just show up with a warrant or probable cause and get the data without your involvement. With strong encryption your data is protected by math, and the math insures that the government or whoever has to go through you to get it. No exceptions. They might throw you in prison for the rest of your life, or threaten to kill your family to get you to give up the encryption keys. But they do need to get you to comply to get access to the decrypted data.

Likewise with blockchain technology. A court or law enforcement agency can't just appropriate stolen bitcoin. They have to either (1) recover the keys, or (2) have the thief pay an equivalent amount in reparations. What I'm saying is that they can't just show up at the Bank of Bitcoin with a warrant and request a stop payment, recovering the funds that way as they're used to with the legacy financial system. The blockchain is irreversible even in the face of the law, for reasons rooted either in physics (proof-of-work) or math (staking).

> The courts will have the power to force blockchains to reverse transactions or other fraud this way - at a technical level still quite difficult but if it becomes law then solutions to make it easier will be created.

No, at a technical level it is impossible. You could no more do this than legislate that pi=3 or raise the speed of light.

On your second point - where I am coming from is that there is nothing stopping countries from creating laws which introduce these powers and outlaw methods to avoid the new legislation. No it doesn't work with the current architecture. But we absolutely can end up in a situation where there is a U.S Ethereum chain where all nodes are legally required to follow updates/forks to the chain as they occur, caused by various court orders to reverse transactions etc. At this point the consensus can go whichever the government likes because those operating the nodes would want to be participating in the current legal chain.

I think this is an unwarranted assumption on your part. Capital would flee the US-controlled fork, causing the price of US-ETH tokens to plummet and staking to centralize. At that point there'd be absolutely no reason for US-ETH to exist: you could operate the same system more efficiently without a blockchain, and by isolating the system you would have lost the main, if not only advantage that blockchain systems have today: low-friction international transactions. Corporate entities which stick with the US-ETH split would find their revenues dry up very fast. I guarantee you that those which survive would be looking for ways to go multinational in their corporate structure so they can continue supporting ETH for non-US participants, and focus all of their efforts there. All this would do is isolate and exclude the US from participating in blockchain innovation.

But how is Ethereum an American company? How does that even compare? When I use visa I signed up for their bullshit. When using Ethereum I never agreed to the US intercepting my data just because a relevant node is randomly in their jurisdiction.

If a node Europe solves my transaction block I it's not an US transaction, isn't it?

You seem to be under the impression that the law doesn't apply until you agree to it.

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> If a node Europe solves my transaction block I it's not an US transaction, isn't it?

That's not really the point the SEC is making.

The point the SEC is making is "look, some of this traffic is in America, so we have to figure out if this traffic is actually legal in America."

Did you have a pure European transaction? Cool beans, this doesn't apply to you.

It seems obvious to me that things can happen online without jurisdiction, just like things can happen in international waters or outer space, and that though these can be governed by treaties or agreements, they cannot usefully be said to occur fully under any one or other jurisdiction.

The reality will be more nuanced than the idealised vision of [0], of course, but it will still be profoundly different to the reality that most regulators and governments would like to see, too. (Just like the reality around narcotics bears little resemblance to the world envisaged by the architects of the war on drugs.)

How this turns out remains to be seen, but it’s clear to me that the right thing to do is not necessarily for everyone to lie down and take whatever the legislators come up with. Civil disobedience is a powerful force for democratic change.

[0] https://www.eff.org/cyberspace-independence